Outlook: The energy complex has experienced another wild swing this morning, as crude and products are trading well below even. May crude is back down over $3 per barrel, while nearby RBOB and ULSD have fallen about 6.75 cents and 8 cents on the day, respectively. Demand concerns due to lockdowns in Europe continue to put pressure on the complex, as parts of the continent have reimposed lockdown measures intended to slow the spread of Covid-19. Next week OPEC+ members will meet for 2 days of meetings. Given the volatility in the market, and considering comments made by the Saudi Energy Minister in the prior meeting, it seems unlikely that the broader group will push for increased production. Saudi Arabia is also likely to continue its voluntary 1.0 million bpd production cut, which they extended for an additional month in the previous meeting. The cautious approach being taken by OPEC+ will likely provide some stability to the market. The Biden administration is planning to announce a new Covid-19 vaccine goal, with the expectation being 200 million doses in the first 100 days of the administration. The previous goal of 100 million doses was hit last week Friday, 42 days ahead of schedule. The U.S. is averaging about 2.5 million vaccinations each day, according to the most recent data from the CDC. Equities are having a rough start to the day despite a better-than-expected report from the U.S. Department of Labor. All three major equity averages are trading well below even. Weakness in the sector is stemming from comments made by Fed Chairman Jerome Powell. He stated that the recovery in the economy has been “substantial” and that the central bank at some point will roll back some of the measures it implemented during the pandemic.
Crude
- This morning the U.S. Department of Labor reported that first-time claims for unemployment totaled 684,000 for the week ending March 20. That is the lowest number seen during the pandemic. Last week first-time claims totaled 781,000. Economists surveyed by Dow Jones expected first-time claims to total 735,000.
- Noble Corporation stated this morning that they will be purchasing Pacific Drilling Company LLC in an all-stock transaction. Both companies filed for Chapter 11 bankruptcy due to the fallout from the pandemic.
- A report from a U.K.-based risk consultancy company states that the transition towards green energy endangers oil-producing nations that have not diversified their economies. Verisk Maplecroft stated that countries such as Algeria, Iraq, and Nigeria would be among the first victims of a wave of political instability that would ensnare oil-producing countries over the next 3-20 years.
- The May crude oil contract is trading $3.10 lower at $58.08. The 20-day and 100-day moving averages are $62.57 and $52.25, respectively. The 14-day RSI is 41.06%.
- As of 10:23 am CST: May Brent is down $2.96 at $61.45, the U.S. dollar index is 0.244 higher at 92.772, while the nearby e-mini S&P 500 futures contract is down 25.50 points at 3,855.25.
Diesel
- The April ULSD contract is trading $0.0818 lower at $1.7438. The 20-day and 100-day moving averages are $1.8671 and $1.5791, respectively. The 14-day RSI is 41.33%.
- China’s National Offshore Oil Corporation CNOOC Ltd. reported a 59% drop in 2020 profit, which was the lowest level seen since 2017. CNOOC was added to the U.S. Commerce Department’s blacklist in late 2020. The sanctions do not target oil exploration or joint ventures outside of the South China Sea, however.
Gasoline
- The April RBOB contract is trading $0.0699 lower at $1.9191. The 20-day and 100-day moving averages are $2.0102 and $1.6361, respectively. The 14-day RSI is 45.34%.
- Yesterday morning the EIA reported that U.S. gasoline inventories rose a modest 202,000 barrels in the week ending March 19. Gasoline demand rose 174,000 bpd to 8.616 million bpd. Gasoline demand is approaching the bottom end of the five-year average. With strong demand anticipated during the course of the summer driving season, it’s likely we’ll see that weekly gasoline demand figure rise into more seasonal average levels.
Propane
- Propane prices are moving lower this morning. At last look, Conway propane was down $0.0125, trading at $0.8125. Mt. Belvieu was down $0.0100, trading at $0.8850.
- Yesterday the EIA reported that U.S. propane inventories rose 239,000 barrels last week. Propane demand fell 241,000 bpd to 1.185 million bpd. Demand for propane tends to follow the seasonal trend of contracting in the spring and summer, pressuring inventories higher and potentially weighing on prices.
Natural Gas
- The April Natural Gas contract is trading $0.055 higher at $2.573. The 20-day and 100-day moving averages are $2.635 and $2.695, respectively. The 14-day RSI is 43.20%.
- This morning the EIA released its Weekly Natural Gas Storage Report and showed that working gas in storage fell 36 Bcf in the week ending March 19. Natural gas stocks are 263 Bcf less than last year at this time, and 78 Bcf below the five-year average.
